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Ruby is a scripting language, like Perl or PHP. Rails is a framework for web development that's built on top of the Ruby language.

Originally Posted by Spawny05

2. What is Ruby generally used for? Like what can it do on a webpage.

Ruby is generally used for system administration tasks and anything else that scripting languages are usually good for, including generating web pages. It can't "do" anything on a web page in the same way that PHP doesn't "do" anything; it just helps generate the page.

If you haven't already, be sure to watch Creating a weblog in 15 minuteshere. Even though it only shows the most basic stuff, it should give you a feel of what's it all about...
If you like that, I also recommend trying out Four Days on Rails. I don't know how up to date it is with rails 1.0 (should be no big deal tho). It's what I did after watching some videos and it was a pretty good introduction for me.